Mpc Must Keep Interest Rates Low Despite Mixed Inflation Figures

Commenting on the June inflation figures, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“Headline CPI inflation fell in line with expectations but it is worrying that core inflation, which strips out energy and food, has risen. While the MPC cannot ignore the risk that inflationary expectations might worsen, it would be a mistake to overreact to these figures by raising interest rates.

“The government’s tough deficit-cutting programme will considerably dampen demand in the economy, and wage pressures appear weak. If the MPC were to consider raising interest rates in these circumstances, risks of a double-dip recession would increase.

“We urge the Committee to persevere with the current expansionary approach. The balance of probabilities still suggests that inflation will fall sharply later in the year.”